Here is how you can create your own low volatility, momentum stock list with this download from the NSE published each month. Each month I hope to publish such a list (see: Nine momentum stocks with low volatility for 2019), but here is how you DIY this.

What is the meaning of momentum stock?

Momentum investing essentially means identifying stocks that have moved up considerably in the past 6-12 months and investing them in the hope that the trend will continue into the future. It is hope on the basis of past research as discussed here for the Indian and US markets: Momentum Stock Investing in India: Does it work?.

As discussed in the first link above, there is a close connection between momentum investing and low volatility. In fact, most momentum stock picking strategies also include a way to filter out stocks based on volatility. That is, they prefer stocks that have moved up in the past (= momentum) with low volatility. Another idea that is closely related is to hunt for stocks that have stayed close to their all-time price highs.

Warning: Whether you choose stocks with momentum or low volatility or both, it is important to recognise when to sell the stocks. This kind of trend following requires serious levels of discipline and commitment. You should be able to buy a stock without question and sell it without question if it no longer has enough momentum and/or low volatility. If you get distracted by the valuation of the stocks, their ROE etc and hesitate or buy more than necessary it will not work. Please do not blindly use this list to buy and clutter your portfolio. Do your own research about momentum and low volatility investing!!

How to create your own low volatility momentum stock list

Step 3: Combine the two lists together and turn on Excel data filter (click the funnel icon on the data tab)

This is how each list would look:

You will get:

weightage in the index

free float market capitalization

Beta a measure of how volatile the stock is with respect to the index (Nifty or Nifty next 50)

Volatility: a measure of absolute volatility of fluctuation in daily price of the stock

R2 or R-squared a measure of how much the stock price movement is correlated to that of the index. Beta is useful only if R2 is high.

monthly return

average impact cost which is a measure of the stocks liquidity

The beta, R2 and volatility is measured for the last one year trailing. So if we get the Dec monthly report the calculation will be from Jan 1st to Dec 31st of that year.

Step 4: Now we start the analysis. The highest R2 is only 0.44 and it drops rapidly below that. This means that no individual stock movement correlates well with that of the index. This also means that the beta values are not of much use.

Step5: Sort the data by ascending or descending volatility and choose the top 10 or 20 or 30 stocks with lowest volatility

Step 7: Look at the one-year return column and filter stocks with positive returns. This is the simple momentum measure. The ideal way would be to look positive returns and max no of months with positive return. So the quality of the momentum is also good (I do this in my monthly low vol, momentum screeners). So you can use an alternative return sources that lists monthly returns as well.

Step 8: Find out stocks that have low volatility (top 30, above list) and stocks that have given a positive return in the last year. That is your low vol, momentum shortlist.

Stock Name

1Y return

Tata Consultancy Services Ltd.

41.27

Britannia Industries Ltd.

34.99

Hindustan Unilever Ltd.

31.76

Tech Mahindra Ltd.

30.34

ICICI Bank Ltd.

16.05

HDFC Bank Ltd.

13.85

Dr. Reddy’s Laboratories Ltd.

7.85

I T C Ltd.

7.42

Larsen & Toubro Ltd.

5.5

Procter & Gamble Hygiene & Health Care Ltd.

4.94

Step 9: Make sure the impact cost of the stock is low as even in the Nifty 100 there could be ill-liquid. These are 15 stocks with highest impact cost. Best to either avoid these or have low exposure.

The New India Assurance Company Ltd.

NHPC Ltd.

Procter & Gamble Hygiene & Health Care Ltd.

General Insurance Corporation of India

SBI Life Insurance Company Ltd.

ABB India Ltd.

Aditya Birla Capital Ltd.

HDFC Standard Life Insurance Company Ltd.

Container Corporation of India Ltd.

Bharti Infratel Ltd.

Hindustan Zinc Ltd.

Petronet LNG Ltd.

Britannia Industries Ltd.

Oil India Ltd.

Bank of Baroda

Step 10: Also keep an eye on the free float market cap and sectors in your shortlist. You want your stocks to have a high free float market cap and from different sectors.

Step 12: Repeat this process each month with new NSE monthly report files. If a stock falls out of your low volatility or low volatility and momentum list, you must not hesitate to sell and replace it. Else this method will not work.

As always please do your due diligence.

Related Viewing

The latest from freefincal @You Tube

Do share if you found this useful

Do check out these related articles:

About the AuthorM. Pattabiraman(PhD) is the author and owner of freefincal.com. He is an associate professor at the Indian Institute of Technology, Madras since Aug 2006. Follow @freefincal “Pattu” as he is popularly known, has co-authored two print-books, You can be rich too with goal based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice.
Pattu publishes unbiased, promotion-free research, analysis and holistic money management advice. Freefincal serves more than one million readers a year (2.5 million page views) with numbers based analysis on topical issues and has more than a 100 free calculators on different aspects of insurance and investment analysis.
He conducts free money management sessions for corporates and associations(see details below). Previous engagements include World Bank, RBI, BHEL, Asian Paints, TamilNadu Investors Association etc. Contact information: freefincal {at} Gmail {dot} com (sponsored posts or paid collaborations will not be entertained)

Want to conduct a sales-free "basics of money management" session in your office?

I conduct free seminars to employees or societies. Only the very basics and getting-started steps are discussed (no scary math):For example: How to define financial goals, how to save tax with a clear goal in mind; How to use a credit card for maximum benefit; When to buy a house; How to start investing; where to invest; how to invest for and after retirement etc. depending on the audience. If you are interested, you can contact me: freefincal [at] Gmail [dot] com. I can do the talk via conferencing software, so there is no cost for your company. If you want me to travel, you need to cover my airfare (I live in Chennai)

Connect with us on social media

Content Policy

Freefincal has original unbiased, conflict-of-interest-free, topical reports, reviews, commentary and analysis on all aspects of personal finance like mutual funds, stocks, insurance etc. All guest authors and contributors to the site also do not have any conflict of interest. If you find the content useful, please consider supporting us by (1) sharing our articles and (2) disabling ad-blockers for our site if you are using one. No promotional content. We do not accept sponsored posts and link exchange requests from content writers and agencies. This is our privacy policyOur website is non-profit in nature. The revenue from the advertisement will only be used for hosting charges, domain registration charges, specific plugins necessary for traffic growth and analytics services for search engine optimisation.

Do check out my books

You Can Be Rich Too with Goal-Based Investing

My first book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You WantMy second book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

The ultimate guide to travel by Pranav Surya

This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for ₹199 (instant download)

Blog Comment Policy

Your thoughts are vital to the health of this blog and are the driving force behind the analysis and calculators that you see here. We welcome criticism and differing opinions. I will do my very best to respond to all comments asap. Please do not include hyperlinks or email ids in the comment body. Such comments will be moderated and I reserve the right to delete the entire comment or remove the links before approving them.

Dear sir After I read your post of same subject on Nov 23 and Dec 28 for the same subject, I was exited and planned for doing it. However when I read post of JAn 5, I am confused because only few of stocks are same and method to estimate the stocks is also different. IS the last method in JAn 5 post ( using NSE) is better? If you can send few words to me s , I shall be obliged. I do nopt know if you reply to such comments and if yes then where. By PM or I have to refer this post??